Citi's $72M Carbon Removal-Linked Note Pays Investors in Biochar Credits

Citi has structured a $72 million "Carbon Removal-Linked Note" to finance a biochar project by environmental solutions company Applied Carbon — and the investors holding that note won't collect a conventional coupon. Their returns arrive as carbon credits, paid out only when the project actually generates and delivers them.

The deal, announced by Citi, channels upfront capital from the note into Applied Carbon's biochar project. In exchange, investors forgo traditional coupon payments and receive distributions tied directly to the issuance and delivery of carbon credits produced by the facility. Citi frames the structure as a new model for private capital funding large-scale carbon removal projects — a template that, if it repeats, turns engineered removal into a bankable asset class.

What does the structure actually change?

The mechanics matter more than the headline number. A conventional project bond pays interest on a schedule regardless of project performance. Here, cash flow to investors is contingent on verified credit generation — the carbon market's version of production-linked repayment.

Sonia Battikh, Global Head of Carbon Offsets Trading at Citi, said:

"The voluntary carbon market requires new financial structures to bridge the gap between investor capital and the long-term funding needs of carbon removal projects."

That gap is real: carbon removal projects carry multi-year buildout horizons before credits flow, while investor capital typically wants defined yield. Linking yield to delivered credits aligns the two — and shifts delivery risk onto investors rather than the developer's balance sheet.

Battikh added:

"By bringing together investors, project developers and long-term carbon demand, we are continuing to expand the range of opportunities through which capital markets can finance real-world outcomes."

The takeaway: this is outcome-priced debt, and its success will be measured in credits delivered against dollars raised.

Why biochar carries the deal

The underlying asset is biochar — biological charcoal made by heating biomass such as forest residue, wood or crop waste in the absence of oxygen. The result is a stable carbon form that, when buried in soil, locks carbon away for centuries and improves soil fertility. Biochar's appeal as a removal route rests on four attributes:

• Long-term carbon storage
• Scalability, given abundant biomass availability
• Relatively low cost compared with other removal technologies
• Agricultural co-benefits

Applied Carbon, founded in 2020, has built a mobile pyrolysis platform that does the whole job in the field. The system collects crop residue, processes it into biochar via high-temperature pyrolysis, quenches it with water, and supplements it with nutrients and microbes — combining pyrolysis and biochar application in a single pass. No centralized plant, no residue haulage; biomass is processed where it lies.

Who buys the credits?

Demand for this project's output is already contracted, in part. Applied Carbon signed an offtake agreement in 2022 with Microsoft covering a portion of the carbon credits the new project will generate — a corporate buyer anchoring long-term demand alongside the note's investors.

That anchor matters for the structure's credibility. Investors paid in credits need a liquid or contracted exit; a Big Tech offtake supplies the demand side of the equation.

Jason Aramburu, Founder & CEO at Applied Carbon, said:

"This financing shows that biochar and engineered carbon removal projects can be structured and financed like any other asset."

What to watch next

Two things decide whether this $72 million becomes a template or a one-off. First, delivery: the project must generate and hand over credits at a volume that makes the forgone coupon worthwhile. Second, replication: whether Citi — or rival structuring desks — places further Carbon Removal-Linked Notes on comparable terms.

The milestone to track is the first credit delivery against the note, the moment this financing model either earns its coupon or exposes its risk.